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Air China (601111): Short-term factors affecting performance reverse layout value leader

Air China (601111): Short-term factors affecting performance reverse layout value leader

This report reads: Air China has the highest quality network and customers at the moment, changes in demand, exchange rates and investment income affect short-term performance.

Until demand stabilizes, long-term profitability will lead the industry.

Investment Highlights: Reverse layout of value leader to maintain “overweight”.

Air China has the highest quality momentary network and customer sources. The short-term demand exchange rate affects the main business and estimates, and the long-term profit will lead the industry.

Reduce EPS for 2019-21 to 0.

43/0.

65/0.

88 yuan (0 for April forecast.

78/0.

88/1.

01), of which the net profit for 2019 is reduced by US $ 5 billion: (1) exchange loss is increased by 3.1 billion; (2) Cathay Pacific ‘s earnings forecast is reduced to a decrease, and investment income is reduced by 1.9 billion, which will drag down the second half of results.

The net profit of foreign exchange deduction for 2019-21 is forecasted to be 80/94/127 (originally 97/127/147).

With reference to the cycle and head effect, the target price is reduced to 11 at 18 times PE in 2020.

7 yuan (originally 13.

89).

The downward cycle of demand shows the stability of main business earnings.

In the first half of the year, net profit fell by 9%; the impact of the leased income statement reduced the deducted foreign exchange profit by only 8%, which was less than the 25% decrease in the profit of civil aviation.

Air China has a network of high-quality moments, and it was the first to show its pricing power when the industry was in a downturn.

Air China ‘s passenger load factor rose 0 in the first half of the year.

At 5%, seat yields fell by only 0.

7%, the head effect is initially reflected.

Public business demand is expected to usher in 杭州桑拿网 recovery.

Air China’s ASK increased by only 6% in the first half of the year, continuing to focus on the high-value trunk market.

From May to July, the proportion of three-figure booking passenger flow decreased, and weak official business affected short-term earnings.

It is expected that September will be the low point of demand in the second half of the year, and public business activities will gradually resume after the National Day, supplementing the supply growth of the industry.

The Beijing base is about to enter the era of fortress hub operation.

Beijing Daxing Airport will be opened soon, Air China’s share in Capital Airport will gradually increase to over 60%, and market control and hub operations will be optimized.

Considering the airspace capacity and economic geography, the overall supply and demand of the Beijing market will remain stable, and the two locations may lead to differentiation of passenger flows.

Air China’s Beijing pricing power is expected to improve significantly.

risk warning.

Regional route risks, exchange rate oil prices, policy risks, security accident risks.

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